International Performance Appraisal

International Performance Appraisal

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25th June 2013

International Performance Appraisal

Performance appraisal is one of the major tools that help in tracking the performance of employees. Organizations may use performance appraisal to motivate employees. Multinational corporations may face several difficulties in formulating performance appraisal. There is very limited research on efficient international performance appraisals that multinational corporations may adopt. A multinational corporation may use three strategies in appraising employees in international subsidiaries. A multinational corporation may use the home appraisal system to appraise employees in their international subsidiaries. A multinational corporation may also formulate a local system to appraise employees in the international subsidiary. Finally, a multinational corporation may appraise expatriates using the home appraisal system and appraise host country nationals (HCN) and third country nationals (TCN) using the local appraisal system (Shen, 2005). All the above performance appraisals have various limitations. There is no single effective international performance appraisal system.

Goal incongruence and information asymmetry between the parent company and the subsidiary are the major factors increase the complexity of international performance appraisals. Information asymmetry refers to the situation where there is a significant difference between the information needs of the parent company and the subsidiary. Goal incongruence refers to a situation where the goal of the parent company and the subsidiary are significantly different (Shen, 2005). Different environmental factors between the parent company and the subsidiary make it difficult for multinational companies to isolate job related factors, determine performance factors, and formulate efficient performance appraisal procedures (Shen, 2005).

Multinational corporations use three different approaches to international performance appraisal. Multinational corporations may use the host-based approach, home-based approach, or integrative approach. In the host-based approach, multinational corporations adopt the local performance appraisal. This approach is responsive to the local needs of the subsidiary. On the other hand, the home-based approach involves the adoption of the home-based appraisal system. This approach creates similar yardsticks for measuring the performance of employees in different countries (Perkins & Shortland, 2006). However, this approach may face stiff opposition from HCN and TCN. Integrative approach is a hybrid approach that uses a mix of home and host performance appraisal systems. The major advantage of this system is the fact that it is responsive to the needs of the host country. However, it is difficult to use this approach (Shen, 2005).